A public interest litigation (PIL) has been filed in the Madras High Court seeking suspension of the board of Lakshmi Vilas Bank, and the appointment of an administrator. The PIL has alleged large-scale mismanagement and release of misleading information/data to the general public and stakeholders, resulting in financial irregularities.

The PIL, filed by R Subramanian, a former employee of the bank, has been admitted. Justices MM Sundresh and R Hemalatha have called for the record in eight weeks.

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Subramanian, a minority shareholder and a depositor, said in the PIL that advances of around ₹2,000 crore were given to Religare, Jet Airways Group, Cox and Kings, Nirav Modi Group, Coffee Day and Reliance Housing Finance. Further, there was an advance of about ₹300 crore that had become an NPA but was not been disclosed.

The loss to the bank is due to bad advances extended, the PIL said.

The mismanagement has resulted in gross non-performing assets (NPA) leaping from 2.67 per cent in 2017 to 15.30 per cent in 2019. It has stretched 25.39 per cent in March 2020, the PIL added.

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Shortfalls concealed

The PIL said that from 2006 to 2016, the bank had shown tremendous growth and expansion of branches across India. However, from 2016, the bank, due to mismanagement and other serious violations of banking regulations, took a big hit. However, all such shortfalls have been completely concealed or misquoted by disclosing false and ‘suited’ details in the public domain, misleading the stakeholders as well as the general public investing in the bank, it added.

The bank published the results for the quarter ended September 2017 on October 11, 2017, declaring a profit of ₹10.50 crore. In fact, it had incurred an approximate loss of ₹7 crore, the PIL alleged.

Rights issue

Subsequently, on November 27, 2017, the bank came out with a rights issue with a hefty premium and raised ₹786 crore.

When the appropriation of Religare Finvest deposits of ₹750 crore remained unsolved and the dispute was raised by the depositor company, the same should be mentioned specifically in the letter of offer and red herring prospectus, but was not, said the PIL.

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However, immediately after the allotment of the rights issue the bank published its December 2017 results on January 30, 2018, showing losses of ₹39.23 crore. The NPA details showed that the bank had misled the public and other stockholders/ investors by suppression of material, said the PIL.

For financial year 2018-19 alone, the investment in unrated and unlisted securities jumped from ₹215.85 crore to ₹265.85 crore.

“All these mishaps have taken place in the recent past by the head of institution — Managing Director and CEO — with or without the knowledge of the Board,” the PIL said.

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